The UK is currently in the midst of a recession (OK technically we may not yet be there but let’s face it we are all talking as if its happening now), and despite the level of fear many people are turning to property investments as a way to weather the storm. Investing in new builds can be a great way to ensure a good return on investment (ROI) in a volatile market. But what should you consider when investing in new builds during a recession? This article will provide an overview of the benefits and risks of investing in new builds in the UK, as well as provide strategies for success.
Introduction to Investing in UK Property During a Recession
The UK is no stranger to recessions, but the current economic crisis has been particularly challenging with many experts predicting a change in the old guard through a deep macro economic recession. Many people are looking for ways to protect their investments during this time, and investing in property is a popular option. Investing in new builds, also known as off-plan developments, can be a great way to generate a good return on investment in a volatile market.
When investing in any type of property, you should always consider the location, price, and rental potential. During a recession, these factors become even more important as you want to make sure you are investing in an area that is likely to recover quickly when the recession ends. Additionally, you should also consider any potential risks associated with investing in a new build, such as the potential for delays in construction, or other unforeseen issues.
Benefits of Investing in New Builds in a Recession
The main benefit of investing in new builds in a recession is that it can provide a good return on investment while getting the upside of capital growth through a new property. New builds tend to be more expensive than existing properties, so you can often get a good return on your investment when the market recovers.
Additionally, new builds are usually built in areas that have been identified as desirable for development, meaning that the market should recover quickly when the recession ends. This is particularly important to buy where the fundamentals are as this will offer you the best chance of growth in both rent and price.
Another benefit of investing in new builds in a recession is that you can often get access to attractive financing options. Many developers are offering attractive financing options to help attract investors during the recession. This can be a great way to get access to a good ROI without having to tie up too much of your own capital.
Finally, investing in new builds can be a great opportunity to diversify your portfolio. By investing in a range of different types of properties, you can reduce the risk associated with any single investment.
Types of New Builds to Consider
When investing in new builds during a recession, there are a few different types of new builds to consider. The most common type of new build is a residential property, such as a house or apartment. These types of properties can provide a good return on investment, as they tend to appreciate in value over time. Additionally, residential properties can be rented out to generate an additional income stream.
Finally, you may also want to consider investing in land. This type of investment is generally only suitable for experienced investors, as it can be more complex and time-consuming than other types of new builds. However, investing in land can be a great way to diversify your portfolio and generate a good return on investment in the long-term.
How to Research and Select the Right New Builds
When investing in new builds, it’s important to do your research and select the right properties. You should start by considering the location and rental potential of the property. You should also consider the price and any potential risks associated with the property.
Once you’ve identified a few potential properties, you should contact the Agent and request detailed information about the property, such as floor plans, building specifications, and construction timelines. You should also research the developer to ensure they have a good reputation and a track record of successful new builds.
Finally, you should speak to a financial advisor to ensure that the investment is a good fit for your financial goals. A financial advisor can also help you identify any potential risks associated with the investment and provide advice on how to mitigate those risks.
A Buyer’s agent who represents your interests rather than the Sellers interest (in the case of an Estate Agent) is often a great decision as they can undertake all this research, negotiation, as well as helping with sales progression. This is a service that Gladfish Property provide.
Financing Options for New Builds
When investing in new builds, financing can be an important factor. Many developers offer attractive financing options to attract investors during a recession. These financing options can include timed deposit payments, which can be a great way to reduce the amount of capital you need to tie up in the investment.
You should also consider other financing options, such as private loans, joint venture agreements, and crowd-funding. These financing options can often provide more attractive terms than traditional bank loans. However, it’s important to remember that these financing options can also be more risky, so you should ensure you fully understand the terms before signing any agreements.
Case Studies of Successful UK New Builds Investments
When considering investing in new builds, it can be helpful to look at case studies of successful investments. For example, the UK property market has seen a number of successful new builds investments in the past few years. One example is the redevelopment of a former office building in Manchester, which was transformed into luxury apartments. The developer was able to secure a loan from a lender, and the apartments sold quickly, generating a good return on investment.
Another example is the redevelopment of a former industrial site in London. The developer was able to secure a loan from a lender, and the apartments sold quickly. The developer was able to generate a good return on investment, despite the recession.
Finally, a large scale waterfront London development which when prices dropped in the Global Financial Crisis then developer offered off market discounts to maintain sales volumes through Gladfish. As the recession evolved and things got better the discounts decreased until the investors that bought at the height of the recession realised a 10-15% discount off previous prices.
These are just three examples of successful new builds investments in the UK. There are many more examples, and by researching successful investments, you can get a better idea of how to approach investing in new builds.
How to Manage a New Build in a Recession
When managing a new build during a recession, it’s important to be aware of the potential risks associated with the investment. One of the main risks is that the market may not recover as quickly as expected, which could lead to delays or losses. Additionally, construction can often be delayed due to a lack of resources or other unforeseen issues, which can also lead to losses.
To mitigate these risks, it’s important to have a strategic plan in place. This plan should include an exit strategy, as well as strategies for mitigating any potential risks. Additionally, you should stay in close contact with the developer and monitor any changes in the market. This will help you to make informed decisions about the investment, and ensure that it is performing as expected.
Risks of Investing in New Builds in a Recession
Investing in new builds in a recession can be a great way to generate a good return on investment, but there are also a number of risks associated with the investment. The most common risk is that the market may not recover as quickly as expected, which could lead to delays or losses. Additionally, construction can often be delayed due to a lack of resources or other unforeseen issues, which can also lead to losses.
Another risk is that the investment may not generate the returns expected. This is especially true in a recession, as the market is more volatile and unpredictable. It’s important to do your research and ensure that the investment is a good fit for your financial goals before making any commitments.
Finally, it’s important to be aware of the potential for fraud or scams. Many developers are offering attractive financing options in order to attract investors, but it’s important to ensure that the developer is reputable and that the terms of the investment are clearly outlined before signing any agreements.
Strategies for Mitigating Risks
When investing in new builds in a recession, it’s important to have strategies in place to mitigate the risks associated with the investment. One of the most important strategies is to have a solid exit strategy in place. This should include an exit plan to ensure that you can quickly liquidate the investment if necessary.
Additionally, it’s important to stay in close contact with the developer and monitor any changes in the market. This will help you to make informed decisions about the investment, and ensure that it is performing as expected.
Finally, it’s important to speak to a financial advisor to ensure that the investment is a good fit for your financial goals. A financial advisor can also help you identify any potential risks associated with the investment and provide advice on how to mitigate those risks.
Conclusion
Investing in new builds during a recession can be a great way to generate a good return on investment in a volatile market. However, it’s important to be aware of the potential risks associated with the investment and to have strategies in place to mitigate those risks. By doing your research and speaking to the team you can ensure that the investment is a good fit for your financial goals and that you can generate a good return on your investment in the long-term.
If you’re considering investing in new builds in the UK during a recession, speak to the team and get a strategic plan that meets the changing market and will put you at the forefront on opportunities. With the right research, financing, and strategies in place, you can ensure that your new build investment is a success.
